USC Chapter 573

in effect

46 U.S.C. § 57301 Definitions

In this chapter: (1) New vessel.—The term “new vessel” means a vessel—(A) constructed under this subtitle and acquired within 2 years after the date of completion; or (B) constructed in a domestic shipyard on private account and not under this subtitle, and documented under the laws of the United States. (2) Obsolete vessel.—The term “obsolete vessel” means a vessel that—(A) is of at least 1,350 gross tons; (B) the Secretary of Transportation believes should, because of its age, obsolescence, or other reasons, be replaced in the public interest; and (C) has been owned by a citizen of the United States for at least 3 years immediately before its acquisition under this chapter.

46 U.S.C. § 57302 Authority to acquire vessels

To promote the construction of new, safe, and efficient vessels to carry the domestic and foreign waterborne commerce of the United States, the Secretary of Transportation may acquire an obsolete vessel in exchange for an allowance of credit toward the cost of construction or purchase of a new vessel as provided in this chapter.

46 U.S.C. § 57303 Utility value and tonnage requirements

(a) Utility Value.—The utility value of a new vessel to be acquired under this chapter for operation in the domestic or foreign commerce of the United States may not be substantially less than that of the obsolete vessel acquired in exchange under this chapter. (b) Tonnage.—If the Secretary of Transportation finds that the new vessel will have a utility value at least equal to that of the obsolete vessel, the new vessel may be of lesser gross tonnage than the obsolete vessel. However, the gross tonnage of the new vessel must be at least one-third the gross tonnage of the obsolete vessel.

46 U.S.C. § 57304 Eligible acquisition dates

At the option of the owner, the acquisition of an obsolete vessel under this chapter shall occur— (1) when the owner contracts for the construction or purchase of a new vessel; or (2) within 5 days of the actual date of delivery of the new vessel to the owner.

46 U.S.C. § 57305 Determination of trade-in allowance

(a) In General.—The Secretary of Transportation shall determine the trade-in allowance for an obsolete vessel at the time of acquisition of the vessel. The allowance shall be the fair value of the vessel. In determining the value, the Secretary shall consider—(1) the scrap value of the obsolete vessel in American and foreign markets; (2) the depreciated value based on a 20-year or 25-year life, whichever applies to the obsolete vessel; and (3) the market value of the obsolete vessel for operation in world commerce or in the domestic or foreign commerce of the United States. (b) Use of Obsolete Vessels.—If acquisition of the obsolete vessel occurs when the owner contracts for the construction of the new vessel, and the owner uses the obsolete vessel during the period of construction of the new vessel, the Secretary shall reduce the trade-in allowance by an amount representing the fair value of that use. The Secretary shall establish the rate for use of the obsolete vessel when the contract for construction of the new vessel is made.

46 U.S.C. § 57306 Payment of trade-in allowance

(a) Acquisition at Time of Contract.—If acquisition of an obsolete vessel under this chapter occurs when the owner contracts for the construction or purchase of the new vessel, the Secretary of Transportation shall apply the trade-in allowance to the purchase price of the new vessel rather than paying it to the owner. If the new vessel is constructed under this subtitle, the Secretary may apply the trade-in allowance to the required cash payments on terms and conditions the Secretary may prescribe. If the new vessel is not constructed under this subtitle, the Secretary shall pay the trade-in allowance to the builder of the vessel for the account of the owner when the Secretary acquires the obsolete vessel. (b) Acquisition at Time of Delivery.—If acquisition of the obsolete vessel occurs when the new vessel is delivered to the owner, the Secretary shall deposit the trade-in allowance in the owner’s capital construction fund.

46 U.S.C. § 57307 Recognition of gain for tax purposes

The owner of an obsolete vessel does not recognize a gain under the Federal income tax laws when the vessel is transferred to the Secretary of Transportation in exchange for a trade-in allowance under this chapter. The basis of the new vessel acquired with the allowance is the same as the basis of the obsolete vessel— (1) increased by the difference between the cost of the new vessel and the trade-in allowance of the obsolete vessel; and (2) decreased by the amount of loss recognized on the transfer.

46 U.S.C. § 57308 Use of vessels at least 25 years old

An obsolete vessel acquired under this chapter that is or becomes at least 25 years old may not be used for commercial operation. However, the vessel may be used— (1) during a period in which vessels may be requisitioned under chapter 563 of this title; or (2) except as otherwise provided in this subtitle, on trade routes serving only the foreign trade of the United States.